I've recently read another article that states that Microsoft has lost at least &2 billion this year in the entertainment portion of the new division it's in. I'm not surprised. Microsoft has lost over $12 billion in their entertainment division since the first XBox, with no clear path to stem those massive losses.
No wonder Elop would get rid of it. I've been following this for years. No matter how many times Microsoft attempts to conceal those losses by merging something profitable into that division (first the small Devices division! and now profits from Android licensing), the losses can be separated out.
Even Bing may be in trouble. I'm wondering when the Feds and the EU will realize that it's almost impossible, if not actually impossible, to remove bing from the Modern UI, and replace it with, say, Google. Or remove IE.
Once that's understood, we could have another few years of lawsuits. I'm surprised that Google and others aren't already on top of this.

If chipsets were the only things that mattered to gamers, the Atari Jaguar and the TurboGrafx 16 would have been far more successful.

Other than the actual technology, gamers also care about the games available (they are not always the same, even today where some games have multiple releases, because of licensing issues; console manufacturers understand that this is where the real money is made), backwards compatibility, controls, networks, and much more.

Pursuing consumers has certainly worked for Apple as a way of leveraging the same technology in the enterprise. One can certainly think of non-consumer applications for the Xbox and its attendant technology if one thinks about it (for instance, long-distance surgery/training).

I didn't intend any direct comparison between the Xbox One and an iPhone. Comparing them in an apples-to-apples way would be silly, as you imply.

The point is that Apple, Microsoft, Google, Sony and others don't just make single products; they each make a range of products that comprise an ecosystem. The ecosystem is what matters in this context, not the individual product. Can the Xbox One be the foundation for an ecosystem that appeals to not only gamers but virtually everyone with a living room? Can iOS/Apple's developer community/Apple TV serve as the foundation for a similar living room play?

Apple has a great ecosystem, and if they try to take over the living room, the ecosystem will be central to doing so. Microsoft is also pitching its living room play around not only the Xbox One, but also itS surrounding ecosystem-- Skype, SkyDrive, IE, etc. Microsoft's ecosystem is different from Apple's in many ways, and each company is taking a different tactic in deploying it. As I mention in the article, Microsoft is charging into the living room via gamers, whereas Apple is taking a different path. This article never makes the argument that an iPhone will take over the living room. Rather, it makes the argument that Microsoft and Sony are entering the living room from a certain angle (i.e. gamers) and that even if Microsoft bests Sony, it might find other formidable challengers coming from other angles (e.g. Google/Apple/Whoever, coming at the living room with a content/UI-centric model, rather than a gaming one).

Put another way, the point isn't whether Microsoft can win over gamers. Gamers are an important part of any "living room domindation" fight-- but winning the gamers doesn't win the larger war. Rather, the point is whether Microsoft can use gamers as a base from which to expand. Likewise, the point isn't that an iPhone can be compared to an Xbox; the point is whether Apple can use its iOS base to build a TV-centric ecosystem that's equally popular and useful.

As has been stated in the article & comments, the console game market is low profit margin & quite limited in growth. Thus, this is not a market that Apple has any interest in moving on. Apple did make an attempt to enter this market back in the late 90's & it was a complete failure. Problem is, it requires so many resources, because you have to have a cutting edge hardware, OS & then drive a developer base, it is too costly. Apple is better off using those resources on their computers & portable devices, where they have a high profit margin as well

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